Energy regulator aims to end default tariffs to protect customers

The energy regulator has urged household suppliers to help move customers onto better value deals as the Government seeks a cap on default tariffs.

Ofgem announced a series of measures it wants to implement aimed at protecting bill-payers from the highest charges and piling more pressure on energy firms to scrap, of their own accord, controversial standard variable tariffs (SVTs).

These are the default prices for electricity and gas that are often the most expensive and were described by Prime Minister Theresa May as a "rip-off".

Half of UK households are still on SVTs despite a pick-up in switching.

The watchdog said it would need legislation in place to enforce a cap on default tariffs and its intervention was seen as strong evidence that no new law will be in place for this winter.

In the meantime it said it was introducing new rules "to allow suppliers to roll customers coming to the end of their contracts onto another fixed deal instead of a poor value standard variable tariff".

It warned companies it would be monitoring the market carefully to ensure new deals did not become a vehicle to penalise customers who fail to switch.

In support of efforts to bolster switching, Ofgem said it was also proposing that consumers receive automatic

compensation if their switch goes wrong.

The regulator's headline measure was that it wanted to extend price protection to one million vulnerable customers on the Warm Home Discount this winter by February - saving them an average £120 - through its safeguard tariff.

Dermot Nolan, chief executive of Ofgem, said: "Ofgem shares the Government's concern that the energy market is not working for all consumers and is determined to reduce the detriment suffered by those overpaying for their energy, particularly those who are vulnerable.

"The Government's proposed bill to provide price protection to those who remain on poor value default deals, such as the standard variable tariff, will give these households peace of mind about the price they pay for their energy.

"In the meantime, we expect suppliers to do more to get customers on poor value default tariffs onto better deals."

The draft bill is expected to be published on Thursday.

Confirmation that the PM was targeting SVTs was met with dismay by some major energy firms and the country's largest business lobby group, the CBI.

Centrica's stock - down 25% in the year to date - fell a further 1% in early trading on the FTSE 100 on Wednesday.

Lawrence Slade, chief executive of industry group Energy UK, said: "The energy market is changing at a rapid pace - there are now over 50 suppliers to choose from and the Energy Switch Guarantee, launched by the industry, means it is simple, speedy and safe to switch, with many customers able to save much more than £100 in minutes by checking their tariff.

"It is right we ensure protection for the most vulnerable, while ensuring we do not risk halting the growth of competition and engagement in the market which is ultimately benefiting all consumers."